You may be too busy dealing with your own retirement fund to worry about anyone else’s. But if you live in the city of San Diego, you’ll have to decide in a few weeks whether the city should switch to a 401(k) system or stick with its traditional pension. We break down what the switch would mean.

SAN DIEGO  Everyone wants to make sure they’ve built up a good nest egg by the time they retire. Proposition B on the June ballot would freeze the base pay of current city employees for five years. But it would also change the city of San Diego’s retirement fund from a pension to a 401(k) system. The switch would apply to all new hires except police officers.

But how would it work exactly? Financial planner Gabriel Wisdom came to KPBS to help explain the basics of how Proposition B would change the city of San Diego’s retirement system.

And he helped to explain the change using eggs. To start, picture three bowls of eggs sitting on a table in front of you.

“These bowls of eggs represent three different pots of money,” Wisdom said. “One represents the city’s General Fund, which it uses to do things like fix streets and provide city services. One represents the city’s pension fund, which it invests in the stock market in the hope it’ll grow. It then uses that money to give retirees the benefits they’ve been promised. And one bowl represents the retirement fund of the employees.”

Try to picture it. We have three bowls of eggs, which represent the General Fund, the pension fund and the individual accounts of retired workers. Currently the city has a defined benefit system. Wisdom describes how that works.

“That means that retirees are guaranteed a certain benefit,” he said, “which is determined mainly by the number of years an employee worked and the salary they got.”

For instance, let’s say an employee is promised four eggs a year for their rest of her life. The city has to give her those four eggs every year, no matter what. But let’s say something happens, like in the last few years when the stock market took a nosedive, and some of those eggs break. Suddenly there aren’t enough pension eggs left to cover the annual payment to employees. Wisdom said the city’s on the hook to replace them.

“Well, that’s where the General Fund comes in,” he said. “When there aren’t enough eggs in the pension fund, the city has to take eggs from the General Fund to cover the losses.”

Now imagine a bunch of eggs being taken from the General Fund bowl and being placed into the pension fund bowl. That means there are fewer eggs left to cover city services, which is one of the downfalls of having a defined benefit system. But it can work the other way too. For instance, in the coming year San Diego will pay $230 million toward the pension, which is less than expected because the stock market went up. But Wisdom said there is a way to avoid all these ups and downs…

“Switching to a defined contribution system would mean the city is not subject to the ups and downs of the stock market,” he said.

“It would change the system so the city only guarantees an employee a certain contribution to their retirement fund, like a 401(k),” Wisdom said. “It doesn’t guarantee what will happen with that contribution.”

So, in terms of eggs, the pension bowl now becomes the 401(k) bowl. Let’s say the city commits to putting two eggs a year into the employee’s 401(k) fund while they’re working and the employee puts one egg a year in to their 401K. Under this plan the city’s contribution is limited and the employee has more control over how their money is invested. But what if the stock market crashes and a bunch of eggs of eggs break? Well, Gabriel said that’s on the employee…

“Under this new system the city only commits to making a certain contribution, it doesn’t have anything to do with what happens to that contribution,” he said. “The employee would have to deal with whatever gains or losses they take on the stock market.”

This is what a lot of people in the private sector went through during the recession. But there’s a difference. Most people in the private sector are enrolled in Social Security, and city employees currently aren’t.

“In the private sector, when the stock market tumbles and the eggs begin to fall, Social Security acts as a kind of safety net,” Wisdom said. “During their working lives, most people in the private sector, and their employers, have also been paying eggs into Social Security.”

And once workers retire they can count on getting a certain number of eggs back from Social Security.

But since right now neither city employees nor the city pay into Social Security, employees won’t get those eggs when they retire. Although Prop B supporters of say future employees could vote on whether they want to re-join the Social Security system, but those details have yet to be worked out.

Not a terribly balanced view on this story. You didn't mention that the millions of dollars the city will save (as projected over the next 30 years will come from salary freezes and not from forcing employees into an undependable 401K retirement system with no access to social security.

Very troubling to hear you deliver such a distorted description of what's at stake with Prop B. Some of your statements were outright wrong (passage of Prop B would NOT freeze base pay). Social security issues are much thornier than you indicated. And the eggs analogy presents listeners with a false and misleading rendition about the way pensions work. This isn't public education. It's public misinformation.

I strongly suggest you pull this item off today's news and come back with something more worthy of KPBS.

Thank you for responding to my story, I appreciate your interest. As I mentioned in the piece, this was meant to look at how the basic nature of San Diego's retirement system would change if Prop B passes. As such, it did not address other issues associated with the measure. However, as you can see from the links we provide in the story, KPBS has covered this issue extensively and will continue to cover it until the June election.

dialyn- Please look at this segment on Evening Edition examining the potential costs and savings associated with Prop B. It includes the IBA's analysis.

normadamashek- The ballot language for Prop B states: "From its effective date until June 30, 2018: 1. Limit a City worker’s base compensation used to calculate the employee’s pension benefits to Fiscal Year 2011 levels. 2. Require that any new job classification be created only after specific findings are made that the new classification “is necessary to achieve efficiencies and/or salary savings” by consolidating job duties or creating a more efficient service delivery method. 3. Define the terms the City must use when it begins negotiations with the City’s labor unions for their contracts, unless the City Council overrides those terms with a two-thirds vote."

If there are any other statements in my story you judge to be misinformation please let me know.

How many other cities in California have their retirement system setup with the government employees able to opt out or not be eligible to participate in the social security ponzi scheme? I thought Galveston, Texas was the only place in the country that is permitted. This ability the government sector workers have to avoid social security in San Diego, is the private sector employee also allowed this and thus able to also retain his labor compensation to invest as he sees fit or to not invest and use as they desire? Is government employee forced to contribute a set amount or can they opt out of contributions and retain their labor compensation? Really curious about these things. This separation really shows precedence that the several states are their own nations each their own republic to govern as they(the citizens) wish to govern their lives within the California republic nation (guaranteed under the Constitution of the U.S. and also in the California Constitution I believe)and not as the federal government wishes to govern usually without regard for the nationals of California republic.

This was an attempt to simplify a complex issue, but really made it sound like the only thing Prop B does is shift the risk from the City to city employees. It makes it sound like Prop B will work, without talking about the initial costs, the unfavorable results of the Independent Budget Analyst, or the disingenuous interests of Prop B's promoters.

Thank you for your clarification above, Katie, but if the segment this morning was all a voter heard on the issue, he or she would have been sadly misinformed.

I'm in the private sector, but I feel more secure than city employees. Unfortunately, many non-city workers truly believe that all retired city employees are overpaid. Their salaries are always blown up to the public; however, these are false figures. It's the politicians and highly paid Managers that receive a substantial cushioned retirement pension. They typical city employee average out at $30 - 50,000 a year, depending on their, position, retirement age and if they completed at least 25-35 years of service. The city is extremely corrupted. Their classified employees have not had a cost-of-living increase in over 6 years, but the politicians and unrepresented/unclassified employees continue to receive raises. However, these politicians want to take from the real working class. The plan is to eliminate retirement for future generations. 401k and 401a won't cut it alone, and they know this, but don't care. The plan is to minimize the number of city employees, limit hiring and use contractors; a plan Demaio openly expressed. Prop. B shouldn't even be on a ballot. It's immoral.

I'm in the private sector, but I feel more secure than city employees. Unfortunately, many non-city workers truly believe that all retired city employees are overpaid. Their salaries are always blown up to the public; however, these are false figures. It's the politicians and highly paid Managers that receive a substantial cushioned retirement pension. The typical city employee average out at $30 - 50,000 a year, depending on the position, retirement age and if they completed at least 25-35 years of service. The city is extremely corrupted. Their classified employees have not had a cost-of-living increase in over 6 years, but the politicians and unrepresented/unclassified employees continue to receive raises. However, these politicians want to take from the real working class. The plan is to eliminate retirement for future generations. 401k and 401a won't cut it alone, and they know this, but don't care. The plan is to minimize the number of city employees, limit hiring and use contractors; a plan Demaio openly expressed. Prop. B shouldn't even be on a ballot. It's immoral.

To normadamashek, I'd be very interested in seeing your argument backing your claim. Otherwise, just shut up quietly.

Pension problem is a problem of entire nation, not just San Diego. While majority of the private sector employee do not have guaranteed pension, why should public workers have. It does come out of nothing, it comes from taxpayers' pocket. This is the very reason San Diego city always run on the brink of bankruptcy.

If people are not happy with the pay and retire package by the city, state or federal government, just go and find a job in private sector. Hope you will be happy there. No one is begging people to stay in public position. There are more people willing to take the positions left behind.

And you think this will lead to a high turnover rate amongst non-police employees? Please. City jobs will still be the sweetest available. Look on the jobs board right now. There are just 6 non-police jobs available out of 10,000+ city positions. SIX! And I bet there are hundreds of people applying for each one. That will not change if Prop B passes.

The pension system was originally put into place by Republican Pete Wilson due to a philosophical resistance to paying Social Security benefits. Here we are years later, with a Republican generated fiscal crisis (the pension system), and what's the Republican solution? To again refuse to fund Social Security benefits for public workers. Any voter who votes in favor of Prop B should also be willing to give up their own Social Security benefits and hope the crap shoot known as 401k is sufficient to fund their retirement. By the way, I don't see Dumanis or Sanders pledging to give up their pensions. Wake up America: Republican economics don't work. Ever.

Casualobserver: *By the way, I don't see Dumanis or Sanders pledging to give up their pensions. Wake up America: Republican economics don't work. Ever.*

Of course not.

And DeMaio is also misleading people.

He acts like he making some big sacrifice by giving up his pension, but it's easy for him - he has already become a multi-millionaire set for life off of tax payer money.

I have posted this before, but will illustrate again due to the upcoming election.

DeMaio has snookered many into thinking he has a long, respectable record in the public sector, but in fact his life has been one calculated, **political** effort to gain wealth and power using tax dollars.

(1) DeMaio graduates from college and immediately immerses himself in high-level Washington DC "K-Street" I sider politics, procuring relationships with such political powerhouses as Newton Gingrich.

(2) DeMaio goes into the "private sector" where he **uses his network of political isiders** to be awarded pay-for-play **government contracts** that make him a very wealthy man. Make no bones about it, DeMaio's wealth even in the private sector was **built on the backs of tax payers through political surrogates**.

(3) once his millions were made, Mr. DeMaio then re-entered direct elected office politics touting his "private sector" and "anti-Big Washington politics" experience (even though his profits were from tax payers and were procured through the BIGGEST Washington Insiders out there.

Of course DeMaio is willing to give up a pension to score political points. It's like Willard Romney turning down a $100,000 Check -- it would be pocket change to him.

And I have even heard DeMaio is still only willing to give up **part** of his pension.

DeMaio's hypocrisy may be a bit more laundered than the blatant hypocrisy of Sanders and Dumanis, but it's nonetheless just as sleazy.